What changed in this filing

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Item 1. Financial Statements

2022-08-09 compared with 2022-05-05 · 182 added, 145 removed, 399 unchanged (45% of the section changed)

34 unchanged sentences

Stockholders' equity:

Preferred shares, $ 0.01 par value, 50,000,000 shares authorized, no shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively

Common shares, $ 0.01 par value, 600,000,000 shares authorized, 159,657,174 and 159,658,948 shares outstanding as of March 31, 2022 and December 31, 2021, respectively

Preferred shares, $ 0.01 par value, 50,000,000 shares authorized, no shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

Common shares, $ 0.01 par value, 600,000,000 shares authorized, 159,991,357 and 159,660,048 shares issued as of June 30, 2022 and December 31, 2021, respectively;

159,882,362 and 159,658,948 shares outstanding as of June 30, 2022 and December 31, 2021, respectively

Additional paid-in capital

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Accumulated other comprehensive loss

Treasury stock at cost, 2,874 and 1,100 shares at March 31, 2022 and December 31, 2021, respectively

Treasury stock at cost, 108,995 and 1,100 shares at June 30, 2022 and December 31, 2021, respectively

Total stockholders’ equity

4 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

THREE MONTHS ENDED MARCH 31,

THREE MONTHS ENDED JUNE 30,

SIX MONTHS ENDED JUNE 30,

(IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)

10 unchanged sentences

Interest expense

Miscellaneous, net

Total other expenses

Income before income taxes

Income (loss) before income taxes

Provision for income taxes

Net income (loss)

Other comprehensive loss:

Foreign currency translation adjustment

Change in fair value of interest rate swap, net of tax $ 60 and $ 161 , respectively

Total other comprehensive loss

Change in fair value from interest rate swap, net of tax of $ 362 , $ 0 , $ 422 , $ 161 , respectively

Reclassification of fair value of interest rate swap, net of tax of $ 0 ,$( 765 ), 0 ,$( 765 )

Total other comprehensive income (loss)

Comprehensive loss

Net income per share attributable to common stockholders:

Net income (loss) per share attributable to common stockholders:

Weighted average common shares outstanding:

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EXCEPT SHARE DATA)

Balance as of March 31, 2021

Equity-based compensation expense

Common shares issued for employee share-based compensation

Restricted stock forfeiture

Reclassification of fair value of interest rate swap, net of tax

Foreign currency translation adjustment

Balance as of June 30, 2021

Balance as of December 31, 2020

Equity-based compensation awards

Equity-based compensation expense

Common shares issued for employee share-based compensation

Restricted stock forfeiture

Change in fair value from interest rate swap, net of tax

Foreign currency translation adjustment, net of tax

Balance as of March 31, 2021

Reclassification of fair value of interest rate swap, net of tax

Foreign currency translation adjustment

Balance as of June 30, 2021

The accompanying notes are an integral part of the condensed consolidated financial statements

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EXCEPT SHARE DATA)

PAID-IN CAPITAL

Balance as of March 31, 2022

Equity-based compensation expense

Restricted stock units withheld for tax liability

Common shares issued for employee share-based compensation

Restricted stock withheld for tax liability and in treasury

Change in fair value from interest rate swap, net of tax

Foreign currency translation adjustment, net of tax

Balance as of June 30, 2022

Balance as of December 31, 2021

Equity-based compensation awards

Restricted stock withheld for tax liability

Equity-based compensation expense

Restricted stock units withheld for tax liability

Common shares issued for employee share-based compensation

Restricted stock withheld for tax liability and in treasury

Change in fair value from interest rate swap, net of tax

Foreign currency translation adjustment, net of tax

Balance as of March 31, 2022

Balance as of June 30, 2022

The accompanying notes are an integral part of the condensed consolidated financial statements

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31,

SIX MONTHS ENDED JUNE 30,

(IN THOUSANDS)

Cash flows from operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization of property and equipment

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Equity-based compensation expense

Unrealized loss on interest rate swap

Deferred income taxes

Changes in assets and liabilities, net of acquisitions:

Changes in assets and liabilities

Accounts receivable

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Cash flows from financing activities:

Proceeds from borrowings on long-term debt

Payments on long-term debt and finance lease obligations

Payment of debt issuance costs

Payments on financing component of interest rate swap

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When combined, these solutions allow the Company to offer customers end-to-end support across the entire product life cycle.

On October 1, 2020, the Company amended the certificate of incorporation of EQT Avatar Topco, Inc.

to change the name of the Company to Certara, Inc.

The Company has operations in the United States, Canada, Spain, Luxembourg, Portugal, United Kingdom, Germany, France, Netherlands, Denmark, Switzerland, Italy, Poland, Japan, Philippines, India, Australia and China.

Summary of Significant Accounting Policies

There have been no changes other than what is discussed herein to the Company’s significant accounting policies as compared to the significant accounting policies described in Note 2 to the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2021.

There have been no changes other than what is discussed herein to the Company’s significant accounting policies as compared to the significant accounting policies described in Note 2 to the Company’s audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes as of and for the year ended December 31, 2021.

Basis of Presentation and Use of Estimates

The preparation of condenesd consolidated financial statements in conformity with U.S.

The preparation of condensed consolidated financial statements in conformity with U.S.

generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

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(b) Unaudited Interim Financial Statements

The accompanying condensed consolidated balance sheet as of March 31, 2022, the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2022 and 2021, the condensed consolidated statements of stockholders’ equity for the three months ended March 31, 2022 and 2021, the condensed consolidated statements of cash flows for the three months ended March 31, 2022 and 2021, and the related interim disclosures are unaudited.

The accompanying condensed consolidated balance sheet as of June 30, 2022, the condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2022 and 2021, the condensed consolidated statements of stockholders’ equity for the three and six months ended June 30, 2022 and 2021, the condensed consolidated statements of cash flows for the six months ended June 30, 2022 and 2021, and the related interim disclosures are unaudited.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S.

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Early application of the ASU is permitted.

The Company is currently evaluating the impact of these amendments on its consolidated financial statements.

The Company is currently evaluating the impact of these amendments on its condensed consolidated financial statements.

(d) Principles of Consolidation

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Cash equivalents include highly liquid investments with maturities of three months or less from the date purchased.

Restricted cash represents cash that is reserved to support a financing program and unexpended restricted grant funds.

The restricted cash balance was $ 745 , $ 827 and $ 733 at March 31, 2022, December 31, 2021, and March 31, 2021, respectively.

Restricted cash represents cash that is reserved to provide for a company credit card program and unexpended restricted grant funds.

The restricted cash balance was $ 3,495 and $ 827 at June 30, 2022 and December 31, 2021, respectively.

The following table provides a reconciliation of cash and cash equivalents and restricted cash to the amounts presented in the condensed consolidated statements of cash flows:

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Derivative Instruments

The Company has an interest rate swap agreement that was designated as a cash flow hedge of interest rate risk for a notional amount of $ 230,000 that fixed the interest rate at 2.1284 %, non-inclusive of the fixed credit spread through May 31, 2022.

On August 31, 2021, the Company entered an amendment to the interest rate swap agreement.

Effective May 31, 2022, the Company has a pay-fixed, receive-variable interest rate swap agreement to modify the interest rate characteristics of term loan debt from variable to fixed in order to reduce the impact of changes in future cash flows due to market interest rate changes.

The swap agreement has a notional amount of $ 230,000 , a fixed rate of 2.8 % and a termination date of August 31, 2025.

At June 30, 2022, the interest swap had a fair value of $ 1,391 and the amount recognized in the other comprehensive income was $ 1,391 .

During the three and six months ended June 30, 2022, the amounts recognized on the condensed consolidated statements of operations and comprehensive loss related to interest on derivative were $ 0 and $ 345 .

The Company also had an interest rate swap agreement for a notional amount of $ 230,000 that fixed the interest rate at 2.1 %, non-inclusive of the fixed credit spread through May 31, 2022.

On August 31, 2021, the Company entered into an

amendment to the interest rate swap agreement.

The amended interest rate swap agreement does not in its entirety meet the definition of a derivative instrument because of its off market fixed rate at inception and is deemed to be a hybrid instrument with a financing component and an embedded at-the-market derivative.

1 unchanged sentence

At inception, the financing component of $ 1,966 was recorded at amortized cost.

The embedded at-the-market derivative was designated and qualified as a cash flow hedge of interest rate risk for a notional amount of $ 230,000 that fixed the interest rate at 1.2757 %, non-inclusive of the fixed credit spread through May 31, 2022.

The fair value of the embedded at-the-market derivative is recognized in

the condensed consolidated balance sheets and the changes in the fair value of the embedded at-the-market derivative is recognized in other comprehensive loss.

At March 31, 2022, the financing component is recorded in current portion of interest rate swap liability in the amount of $ 439 .

Due to an other-than-insignificant financing element on a portion of such hybrid instrument, the cash flows associated with this hybrid instrument are classified as financing activities in the condensed consolidated statements of cash flows.

At March 31, 2022, the Company recorded the fair value of the embedded at-the-market derivative in current portion of interest rate swap assets in the amount of $ 181 .

The Company did not recognize any changes in the fair value of the interest rate swap in interest expense for the three months ended March 31, 2022.

The following table sets forth the assets that is measured at fair value on a recurring basis by the levels in the fair value hierarchy at March 31, 2022:

Due to an other-than-insignificant financing element on a portion of such hybrid instrument, the cash flows associated with this hybrid instrument were classified as financing activities in the consolidated statements of cash clows.

The interest rate swap matured on May 31, 2022.

At June 30, 2022, the Company did not record any amounts for the financing component and fair value of the interest rate swap in the condensed consolidated balance sheets.

The Company reclassified $ 3,033 of accumulated comprehensive loss to interest expense in the condensed consolidated statements of comprehensive (loss) income in the second quarter of 2021 due to hedge ineffectiveness.

Excluding the amount reclassified, the interest expense recognized on the derivative was $ 7 , $ 649 , $( 179 ), $ 661 for the three and six months ended June 30, 2022 and 2021, respectively.

The Company uses derivatives to manage certain interest exposures and designated all the derivatives as cash flow hedges.

The Company records derivatives at fair value on its condensed consolidated balance sheets.

Changes in the fair value of derivatives designated as cash flow hedges are recorded as a component of accumulated other comprehensive income.

Those amounts are reclassified into interest expenses in the same period during which the hedged transactions impact earnings.

The following table sets forth the assets that are measured at fair value on a recurring basis by the levels in the fair value hierarchy at June 30, 2022:

Interest rate swap asset

1 unchanged sentence

Interest rate swap asset

The net amount of deferred gains related to derivative instruments designated as cash flow hedges that is expected to be reclassified from accumulated other comprehensive gains into earnings over the next twelve months is $ 676 .

For more information regarding fair value measurement and fair value hierarchy, see Note 2.

“Summary of Significant Accounting Policies” in the notes to the consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

The net amount of deferred losses related to derivative instruments designated as cash flow hedges that is expected to be reclassified from accumulated other comprehensive loss into earnings over the next twelve months is insignificant.

Revenue Recognition

In accordance with Accounting Standards Codification Topic 606 ("ASC Topic 606"), “Revenue from Contracts with Customers”, the Company determines revenue recognition through the following steps:

Identification of the contract, or contracts, with a customer

Identification of the performance obligations in the contract

Determination of the transaction price

Allocation of the transaction price to the performance obligations in the contract

Recognition of revenue when, or as, the Company satisfies a performance obligation

The Company’s revenue consists of fees for perpetual and term licenses for the Company’s software products, post- contract customer support (referred to as maintenance), software as a service (“SaaS”), and professional services including training and other revenue.

Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for promised goods or services.

The Company typically recognizes license revenue at a point in time upon delivering the applicable license.

The revenue related to the support and maintenance performance obligation will be recognized on an over-time basis using time elapsed methodology.

The revenue related to software training and software implementation performance will be recognized at the completion of the service.

The following describes the accounting policies for multiple performance obligations and the nature of the Company’s primary types of revenues and the revenue recognition policies as they pertain to the types of transactions the Company enters into with its customers.

The following describes the nature of the Company’s primary types of revenues and the revenue recognition policies as they pertain to the types of transactions the Company enters into with its customers.

Arrangements with Multiple Performance Obligations

For contracts with multiple performance obligations, the Company determines if the products or services are distinct and allocates the consideration to each distinct performance obligation on a relative standalone selling price basis.

For contracts with multiple performance obligations, such as a software license plus software training, implementation, and/or maintenance/support, or in contracts where there are multiple software licenses, the Company determines if the products or services are distinct and allocates the consideration to each distinct performance obligation on a relative standalone selling price basis (“SSP”).

When products and services are not distinct, the Company determines an appropriate measure of progress based on the nature of its overall promise for the single performance obligation.

1 unchanged sentence

However, any training, implementation, or support and maintenance promises as part of the software license agreement would be considered separate performance obligations, as those promises are distinct and separately identifiable from the software licenses.

The payment terms in these arrangements are sufficiently short such that there is no significant financing component to the transaction.

Software Licenses and Support

The payment terms in these arrangements are less than one year such that there is no significant financing component to the transaction.

Software Licenses

License revenue includes perpetual license fees and term license fees, which provide customers with the same functionality and differ mainly in the duration over which the customer benefits from the use of software.

1 unchanged sentence

Software Services

For contracts that include multiple performance obligations, such as a software license plus software training, implementation, and/or maintenance/support, or in contracts where there are multiple software licenses, the transaction price is allocated to each of the performance obligations on a pro-rata basis based on the relative standalone selling price (“SSP”) of each performance obligation.

Maintenance services agreements consist of fees for providing software updates and for providing technical support for software products for a specified term.

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Maintenance contracts generally have a term of one year.

Expenses related to maintenance and subscription are recognized as incurred.

While transfer of control of the software training and implementation performance obligations are over time, the services are typically started and completed within a few days.

Due to the quick nature of the performance obligation from start to finish and the immaterial amounts, the Company recognizes any software training or implementation revenue at the completion of the service.

Any unrecognized portion of amounts paid in advance for licenses and services is recorded as deferred revenue.

Certara’s software contracts do not typically include discounts, variable consideration, or options for future purchases that would not be similar to the original goods.

Subscription Revenues

Subscription revenues consists of subscription fees for access to, and related support for, our cloud-based solutions.

Due to the quick nature of the performance obligation from start to finish and the insignificant amounts, the Company recognizes any software training or implementation revenue at the completion of the service.

Any unrecognized portion of amounts paid in advance for licenses and services is recorded as

deferred revenue.

The Company’s software contracts do not typically include discounts, variable consideration, or options for future purchases that would not be similar to the original goods.

Software as a Service SaaS Revenues

SaaS revenues consists of subscription fees for access to, and related support for, the Company’s cloud-based solutions.

The Company typically invoices subscription fees in advance in annual installments and recognizes subscription revenue ratably over the term of the applicable agreement, usually one to three years which is initially deferred and recognized ratably over the life of the contract.

Services and Other Revenues

The Company’s primary services offering includes consulting services, which may be either strategic consulting services, reporting and analysis services, regulatory writing services, or any combination of the three.

The Company’s primary professional services offering includes consulting services, which may be either strategic consulting services, reporting and analysis services, regulatory writing services, or any combination of the three.

Strategic consulting services consists of consulting, training, and process redesign that enables customers to identify which uncertainties are greatest and matter most and then to design development programs, trial sequences, and individual trials in such a way that those trials systematically reduce the identified uncertainties in the most rapid and cost-effective manner possible.

The Company’s professional services contracts are either time-and-materials, fixed fee or prepaid.

The Company’s professional services contracts are either time-and-materials or fixed fee.

Services revenues are generally recognized over time as the services are performed.

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Revenue from time-and-material contracts is recognized on an output basis as labor hours are delivered and/or direct expenses are incurred.

Revenues for fixed price services and prepaid are generally recognized over time applying input methods to estimate progress to completion.

Accordingly, the number of resources being paid for and

varying lengths of time they are being paid for, determine the measure of progress.

Revenues for fixed price services are generally recognized over time applying input methods to estimate progress to completion.

Accordingly, the number of resources being paid for and varying lengths of time they are being paid for, determine the measure of progress.

Training revenues are recognized as the services are performed over time.

However, due to short period over which the transfer of control occurs for a classroom or on-site training course, the revenue related to these performance obligations is recognized at the completion of the course for administrative feasibility purposes.

The training services generally do not provide for any non-cash consideration nor is there consideration payable to a customer.

However, due to the short period over which the transfer of control occurs for a classroom or on-site training course, the revenue related to these performance obligations is recognized at the completion of the course for administrative feasibility purposes.

Contract Balances

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits (deferred revenue, contract liabilities) on the Consolidated Balance Sheets.

Amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g., quarterly or monthly) or upon achievement of contractual milestones.

Contract assets relate to the Company’s rights to consideration for performance obligations satisfied but not billed at the reporting date on contracts (i.e., unbilled revenue, a component of accounts receivable in the Consolidated Balance Sheets).

Contract assets are billed and transferred to customer accounts receivable when the rights become unconditional.

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Invoiced amounts for non-cancelable services starting in future periods are included in contract assets and deferred revenue.

The portion of deferred revenue that will be recognized within 12 months is recorded as current deferred revenue, and the remaining portion is recorded as non-current deferred revenue in the Consolidated Balance Sheets.

The unsatisfied performance obligations as of March 31, 2022 were approximately $ 101,246 .

The unsatisfied performance obligations as of June 30, 2022 were approximately $ 120,980 .

Deferred Contract Acquisition Costs

Under ASC 606, sales commissions paid to the sales force and the related employer payroll taxes, collectively “deferred contract acquisition costs”, are considered incremental and recoverable costs of obtaining a contract with a customer.

The Company has determined that sales commissions paid are an immaterial component of obtaining a customer’s contract and has elected to expense sales commissions when paid.

The Company recognizes an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year.

The Company has determined that certain sales incentive programs meet the requirements to be capitalized.

The costs capitalized are primarily sales commissions for our sales force personnel.

Capitalized costs to obtain a contract are amortized on a straight line basis over the expected period of benefit.

Amortization of capitalized costs are included in sales and marketing expense in our condensed consolidated statements of operations and comprehensive loss.

Capitalized contract acquisition cost was $ 495 as of June 30, 2022 and was included in prepaid expenses and other current assets in the condensed consolidated balance sheets.

Grant Revenue

The Company receives grant funding for certain specific projects from time to time.

These grants specify the funds provided are to be used exclusively to satisfy the deliverables outlined in the grant agreements.

In these agreements both involved parties receive and sacrifice approximately commensurate value so these are accounted as exchange transactions, so revenue is recognized according to ASC Topic 606.

The grant funding is generally provided near contract inception so a contract liability is initially recorded and revenue is recognized as the performance obligations are satisfied over time.

Sources and Timing of Revenue

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The following table presents the Company’s revenue by timing of revenue recognition to understand the risks of timing of transfer of control and cash flows:

THREE MONTHS ENDED MARCH 31,

THREE MONTHS ENDED JUNE 30,

SIX MONTHS ENDED JUNE 30,

Software licenses transferred at a point in time

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Basic earnings per common share is computed by dividing the net income that is attributable to common stockholders by the weighted-average number of common shares outstanding during the reporting period, without consideration for potentially dilutive securities.

The dilutive effect of potentially dilutive securities is excluded from basic earnings per share

and is included in the calculation of diluted earnings per share.

The dilutive effect of potentially dilutive securities is excluded from basic earnings per share and is included in the calculation of diluted earnings per share.

Restricted stock and restricted stock units granted by the Company are treated as potential common shares outstanding in computing diluted earnings per share.

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Since the first quarter of 2020, the COVID-19 pandemic has posed a significant threat to public health as well as the global and U.S.

The continued spread of variants of COVID-19 may adversely impact our business, financial condition or results of operations as a result of increased costs, negative impacts to our workforce, delay or cancellation of projects due to disruption of clinical trials, or a sustained economic downturn.

Although the spread of the virus seems to have subsided, the possibility of a resurgence due to a new strain is possible.

Given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on the global and US economy and our business.

The continued spread of variants of COVID-19 may adversely impact our business, financial condition or results of operations as a result of increased costs, negative impacts to the Company’s workforce, delay or cancellation of projects due to disruption of clinical trials, or a sustained economic downturn.

Given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on the global and US economy and the Company’s business.

Public Offerings

The Company is party to a registration rights agreement with EQT AB and its affiliates (“EQT AB”), Arsenal, EQT, and certain other stockholders (“Institutional Investors”).

The Company is party to a registration rights agreement with EQT AB and its affiliates (“EQT”), Arsenal Capital Partners, and certain other stockholders (collectively, the “Institutional Investors”).

It contains provisions that entitle EQT and the other Institutional Investors thereto to certain rights to have their securities registered by the Company under the Securities Act.

EQT is entitled to an unlimited number of “demand” registrations, subject to certain limitations.

Every Institutional Investor that holds registration rights is also be entitled to customary “piggyback” registration rights.

Every Institutional Investor that holds registration rights is also entitled to customary “piggyback” registration rights.

In addition, the amended and restated registration rights agreement provides that the Company will pay certain expenses of the Institutional Investors relating to such registrations and indemnify them against certain liabilities which may arise under the Securities Act of 1933.

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The Company incurred costs of $ 1,100 , recorded in general and administrative expenses, in relation to the secondary public offering.

On September 13, 2021, the Company completed another public offering, at a public offering price of $ 31.00 per share, pursuant to which the Company sold 4,500,000 shares of its common stock, and certain selling stockholders sold 18,500,000 shares of the Company’s common stock, including an additional 3,000,000 shares of common stock pursuant to the full exercise of the underwriters’ option to purchase additional shares.

On September 13, 2021, the Company completed another public offering, at a public offering price of $ 31.00 per share, pursuant to which the Company sold 4,500,000 shares of its common stock, and certain selling stockholders sold 18,500,000 shares of the Company’s common stock, including a 3,000,000 shares of common stock pursuant to the full exercise of the underwriters’ option to purchase additional shares.

The Company received net proceeds of $ 134,096 , after deducting underwriters' discounts and commissions.

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On November 22, 2021, the Company completed another secondary public offering in which certain selling stockholders, including EQT, sold 10,000,000 shares of the Company’s common stock.

The Company did not offer any common stock

in this transaction and did not receive any proceeds from the sale of the shares of common stock by the selling stockholders.

The Company did not offer any common stock in this transaction and did no t receive any proceeds from the sale of the shares of common stock by the selling stockholders.

The Company incurred costs of $ 644 , recorded in general and administrative expenses, in relation to the secondary public offering.

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The Company invests available cash in bank deposits, investment-grade securities, and short-term interest-producing investments, including government obligations and other money market instruments.

At March 31, 2022 and December 31, 2021, the investments were bank deposits and overnight sweep accounts.

At June 30, 2022 and December 31, 2021, the investments were bank deposits and overnight sweep accounts.

The Company has adopted credit policies and standards to evaluate the risk associated with sales that require collateral, such as letters of credit or bank guarantees, whenever deemed necessary.

Management believes that any risk of loss is significantly reduced due to the nature of the customers and distributors with which the Company does business.

As of March 31, 2022 and December 31, 2021, no single customer accounted for more than 10% of the Company’s accounts receivable.

No customers accounted for more than 10% of the Company’s revenues during the three months ended March 31, 2022 and 2021.

As of June 30, 2022 and December 31, 2021, no single customer accounted for more than 10% of the Company’s accounts receivable.

No single customers accounted for more than 10% of the Company’s revenues during the six months ended June 30, 2022 and 2021.

Acquisitions have been accounted for using the acquisition method of accounting pursuant to FASB ASC 805, “Business Combinations.” Amounts allocated to the purchased assets and liabilities are based upon the total purchase price and the estimated fair values of such assets and liabilities on the effective date of the purchase as determined by an independent third party.

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On March 2, 2021, the Company completed a transaction which qualified as a business combination for a total consideration of $ 2,667 .

The business combination was not material to our consolidated financial statements.

The business combination was not significant to our consolidated financial statements.

Based on the Company’s purchase price allocation, approximately $ 1,200 , $ 100 and $ 1,200 of the purchase price was assigned to customer relationships, non-compete agreements and goodwill, respectively.

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On June 7, 2021, the Company completed a transaction which qualified as a business combination for a total consideration of $ 15,197 .

The business combination was not material to our consolidated financial statements.

The business combination was not significant to our consolidated financial statements.

Based on the Company’s purchase price allocation, approximately $ 7,400 and $ 4,700 of the purchase price was assigned to customer relationships and goodwill, respectively.

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Net assets acquired

The fair value of the unregistered shares given as part of the purchase consideration was determined based on the market price of Certara stock on the closing date less a 7 % discount for lack of marketability.

The fair value of the unregistered shares given as part of the purchase consideration was determined based on the market price of Certara common stock on the closing date less a 7 % discount for lack of marketability.

The acquisition was structured as an asset acquisition for income tax purposes;

therefore, the Company’s tax basis in Pinnacle’s identifiable assets reflects the fair value of consideration paid.

However, the company did not recognize tax basis in certain liabilities assumed at the acquisition date;

However, the Company did not recognize tax basis in certain liabilities assumed on the acquisition date;

resulting in deferred income taxes being recorded in purchase accounting.

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(“INDS”), a company that provides the SEND Explorer software and drug development consulting for a total consideration of $ 8,048 .

The business combination was not material to the Company’s condensed consolidated financial statements.

Based on the Company’s preliminary purchase price allocation, approximately $ 2,500 , $ 860 and $ 2,855 of the purchase price was assigned to customer relationships, acquired software and goodwill, respectively.

The current purchase price allocation is preliminary.

The primary areas of the preliminary purchase price allocations that are not yet finalized relate to the fair value of certain tangible and intangible assets acquired, and liabilities assumed, and residual goodwill.

The Company expects to continue to obtain information to assist in determining the fair values of the net assets acquired at the acquisition date during the measurement period.

Any adjustments to the preliminary purchase price allocation identified during the measurement period, which will not exceed one year from the acquisition date, will be accounted for prospectively.

The business combination was not significant to the Company’s condensed consolidated financial statements.

Based on the Company’s purchase price allocation, approximately $ 2,380 , $ 1,040 , $ 100 , and $ 2,910 of the purchase price was assigned to customer relationships, developed technology, non-compete agreements, and goodwill, respectively.

The condensed consolidated financial statements include the operating results of each acquisition from the date of acquisition.

Pro forma results of operations revenue and net income subsequent to the acquisition date for three months ended March 31, 2022 have not been presented because the effects of the acquisition was not material to our financial results.

Prepaid Expenses and Other Current Assets and Other Supplemental Assets Information

Prepaid Expenses and Other Current Assets and Other Long-Term Assets

Prepaid expenses

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Long-term deposits

Derivative assets - long-term

Deferred financing cost

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The Company and lenders entered into a third amended and restated loan agreement on June 17, 2021 (“Third Amendment”), which provides for, among other things, (i) the extension of the termination date applicable to the revolving credit commitments under the Credit Agreement to August 2025, (ii) the extension of the maturity date applicable to the term loans under the Credit Agreement to August 2026, and (iii) an increase of approximately $ 80,000 in commitments available under the revolving line of credit (resulting in an aggregate amount of commitments of $ 100,000 ).

The term loan under the Third Amendment has substantially the same terms as the existing term loans and revolving credit commitments.

loan under the Third Amendment has substantially the same terms as the existing term loans and revolving credit commitments.

The Credit Agreement is collateralized by substantially all U.S.

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subsidiaries and contain various financial and nonfinancial covenants.

As of March 31, 2022 and December 31, 2021, available borrowings under the revolving lines of credits were $ 100,000 .

Available borrowings under the revolving lines of credits as of March 31, 2022 and December 31, 2021 were reduced by $ 120 and $ 239 standby letters of credit issued to a landlord in lieu of a security deposit in addition to any outstanding borrowings.

The Company was in compliance with all financial covenants as of March 31 2022 and December 31, 2021.

As of June 30, 2022 and December 31, 2021, available borrowings under the revolving lines of credits were $ 100,000 .

Available borrowings under the revolving lines of credits as of June 30, 2022 and December 31, 2021 were reduced by $ 120 and $ 239 standby letters of credit issued to a landlord in lieu of a security deposit in addition to any outstanding borrowings.

Borrowings under the Credit Agreement are subject to a variable interest rate at LIBOR plus a margin.

The applicable margins are based on achieving certain levels of compliance with financial covenants.

The effective interest rate was 3.64 % and 3.75 % for the three months ended March 31, 2022 and 2021 for the term loan debt, respectively.

The effective interest rate was 3.98 % and 3.73 % for the six months ended June 30, 2022 and 2021 for the term loan debt, respectively.

As discussed previously, the Company entered into interest rate swap agreements to mitigate the interest risk.

Interest incurred on the Credit Agreement with respect to the term loan amounted to $ 2,737 and $ 2,854 for the three months ended March 31, 2022 and 2021, respectively.

Accrued interest payable on the Credit Agreement with respect to the term loan amounted to $ 33 and $ 30 at March 31, 2022 and December 31, 2021, respectively, and is included in accrued expenses.

Interest incurred on the Credit Agreement with respect to the revolving line of credit was $ 63 and $ 12 for the three months ended March 31, 2022 and 2021, respectively.

There was $ 1 and $ 66 accrued interest payable on the revolving line of credit at March 31, 2022 and December 31, 2021, respectively.

Interest incurred on the Credit Agreement with respect to the term loan amounted to $ 5,978 and $ 5,671 for the six months ended June 30, 2022 and 2021, respectively.

Accrued interest payable on the Credit Agreement with respect to the term loan amounted to $ 43 and $ 30 at June 30, 2022 and December 31, 2021, respectively, and is included in accrued expenses.

Interest incurred on the Credit Agreement with respect to the revolving line of credit was $ 128 and $ 33 for the six months ended June 30, 2022 and 2021, respectively.

There was $ 1 and $ 66 accrued interest payable on the revolving line of credit at June 30, 2022 and December 31, 2021, respectively.

Long-term debt consists of the following:

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Long-term debt, net of current portion and debt issuance costs

The principal amount of long-term debt outstanding as of March 31, 2022 matures in the following years:

The principal amount of long-term debt outstanding as of June 30, 2022 matures in the following years:

Remainder of 2022

The Credit Agreement requires the Company to make an annual mandatory prepayment as it relates to the Company’s Excess Cash Flow calculation.

For the year ended December 31, 2021, the Company was not required to make a mandatory

prepayment on the term loan.

For the year ended December 31, 2021, the Company was not required to make a mandatory prepayment on the term loan.

For the Credit Agreement, the Company is required to make a quarterly principal payment of $ 755 on the term loan each quarter starting from the end of September 2021.

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The Company leases certain office facilities and equipment under non-cancelable operating and finance leases with remaining terms from one to six years .

Operating lease ROU assets are included in other asset section while finance lease ROU assets are included in "Property and equipment, net"

Operating lease right of use assets are included in “other assets” section while finance lease right of use assets are included in "property and equipment, net"

in the condensed consolidated balance sheets.

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in the condensed consolidated balance sheets.

At March 31, 2022, The weighted average remaining lease terms were 3.63 years and 0.83 year for operating and finance lease, respectively;

the weighted average discount rate were 4.08 % and 6.19 % for operating and finance lease, respectively.

For additional information on the Company's leases, see Note 14 to the Consolidated Financial Statements included in the 2021 Annual Report on Form 10-K.

The following table summarizes the lease-related assets and liabilities recorded in the consolidated balance sheets at March 31, 2022 and December 31, 2021:

At June 30, 2022, the weighted average remaining lease terms were 3.49 years and 0.58 year for operating and finance leases, respectively;

the weighted average discount rate were 4.10 % and 6.19 % for operating and finance leases, respectively.

For additional information on the Company's leases, see Note 14 to the consolidated financial statements included the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

The following table summarizes the lease-related assets and liabilities recorded in the consolidated balance sheets at June 30, 2022 and December 31, 2021:

Lease Position

Balance Sheet Classification

March 31, 2022

JUNE 30, 2022

DECEMBER 31, 2021

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Total lease liabilities

The following table summarizes by year the maturities of our minimum lease payments as of March 31, 2022.

The following table summarizes by year the maturities of our minimum lease payments as of June 30, 2022.

Remainder of 2022

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imputed interest

Accrued Expenses and Other Supplemental Liabilities Information

Accrued Expenses and Other Current Liabilities

Accrued expenses consist of the following:

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Restricted Stock

The majority of the company’s restricted stock awarded to its employees were originally issued in December 2020 to exchange the Class B Profits Interest Unit (the “Class B Plan”) of EQT, former parent of the Company.

The majority of the Company’s restricted stock awarded to its employees were originally issued in December 2020 to exchange the Class B Profits Interest Unit (the “Class B Units”) of EQT.

Modification accounting was not required for the time-based vesting Class B Units for which the vesting conditions, classification and fair market value did not change as a result of the shares of restricted common stock that replaced them.

The original grant date fair value will continue to be recognized on a straight-line basis.

Modification accounting was

required for the performance-based vesting Class B Units that were exchanged for time-based vesting restricted common stock, given the vesting conditions were changed.

Modification accounting was required for the performance-based vesting Class B Units that were exchanged for time-based vesting restricted common stock, given the vesting conditions were changed.

Share-based compensation for the restricted stock exchanged for the time-based Class B Units is recognized on a straight-line basis over the requisite service period of the award, which is generally five years .

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In 2021, the Company granted 87,127 replacement shares of restricted stock in connection with the Pinnacle business acquisition under which equity-based awards are outstanding.

The fair value of the per share of restricted stock issued in 2021 was measured using grant date fair market value adjusted lack of marketability for these shares.

The fair value of the restricted stock awarded was initially based on the fair value of our common stock on the date of grant, then adjusted for time restrictions due to unregistered

shares and lack of marketability.

Total grant date fair value was $ 2,762 .

The restricted stock issued in 2021 generally have a three year vesting period except for one holder whose shares vests equally on a monthly basis for 2 years .

The restricted stock issued in 2021 generally have a three year vesting period except for one holder whose shares vests equally on a monthly basis for two years .

Non-vested restricted stock as of December 31, 2021

Non-vested restricted stock as of March 31, 2022

The Company did no t authorize or issue any restricted stock during the three-month period ended March 31, 2022.

Non-vested restricted stock as of June 30, 2022

The Company did no t authorize or issue any restricted stock during the six-month period ended June 30, 2022.

The number of the restricted stock vested includes 3,478 shares of common stock that were withheld on behalf of employees to satisfy the statutory tax withholding requirements.

Equity-based compensation expenses related to the restricted stock exchanged for Performance-based Class B Units were $ 2,120 and $ 4,041 for the three months ended March 31, 2022 and 2021, respectively.

At March 31, 2022, the total unrecognized equity-based compensation expense related to outstanding restricted stock recognized using the accelerated attribution approach was $ 9,518 , which is expected to be recognized over a weighted-average period of 23.4 months.

Equity-based compensation expenses related to the restricted stock exchanged for Time-based Class B Units were $ 766 and $ 777 for the three months ended March 31, 2022 and 2021, respectively.

At March 31, 2022, the total unrecognized equity-based compensation expense related to outstanding restricted stock recognized using the straight-line attribution approach was $ 5,628 , which is expected to be recognized over a weighted-average period of 31.2 months.

Equity-based employee compensation expense related to the time-based restricted stock for the Pinnacle acquisition was $ 292 for the three months ended March 31, 2022.

At March 31, 2022, the total unrecognized equity-based compensation expenses related to outstanding restricted stock recognized using the straight-line attribution approach was $ 2,178 , which is expected to be recognized over a weighted-average period of 23.8 months.

Equity-based compensation expenses related to the restricted stock exchanged for performance-based Class B Units were $ 1,957 and $ 4,077 for the three and six months ended June 30, 2022, respectively.

At June 30, 2022, the total unrecognized equity-based compensation expense related to outstanding restricted stock recognized using the accelerated attribution approach was $ 7,561 , which is expected to be recognized over a weighted-average period of 22.6 months.

Equity-based compensation expenses related to the restricted stock exchanged for time-based Class B Units were $ 766 and $ 1,531 for the three and six months ended June 30, 2022, respectively.

At June 30, 2022, the total unrecognized equity-based compensation expense related to outstanding restricted stock recognized using the straight-line attribution approach was $ 4,862 , which is expected to be recognized over a weighted-average period of 29.6 months.

Equity-based employee compensation expense related to the time-based restricted stock for the Pinnacle acquisition were $ 292 and $ 584 for the three and six months ended June 30, 2022.

At June 30, 2022, the total unrecognized equity-based compensation expenses related to outstanding restricted stock recognized using the straight-line attribution approach was $ 1,886 , which is expected to be recognized over a weighted-average period of 21.1 months.

2020 Incentive Plan

In order to align our equity compensation program with public company practices, the Company’s Board of Directors adopted and stockholders approved the 2020 Incentive Plan.

The 2020 Incentive Plan allows for grants of non-qualified stock options, incentive stock options, restricted stock, and restricted stock units (RSUs) to employees, directors and officers, and consultants or advisors of the Company.

In order to align the Company’s equity compensation program with public company practices, the Company’s Board of Directors adopted and stockholders approved the 2020 Incentive Plan.

The 2020 Incentive Plan allows for grants of non-qualified stock options, incentive stock options, restricted stock, restricted stock units (RSUs), and performance stock units (PSUs) to employees, directors and officers, and consultants or advisors of the Company.

The 2020 Incentive Plan allows for 20,000,000 shares (the “plan share reserve”) of common stock to be issued.

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Non-vested RSUs as of December 31, 2021

Non-vested RSUs as of March 31, 2022

Equity-based compensation expenses related to the RSUs were $ 3,388 and $ 333 for three months ended March 31, 2022 and 2021, respectively.

At March 31, 2022, the total unrecognized equity-based compensation expense related to outstanding RSUs was $ 26,557 , which is expected to be recognized over a weighted-average period of 25.9 months.

Non-vested RSUs as of June 30, 2022

* The shares granted during 2022 were primarily issued on April 1, 2022 under the 2020 Incentive Plan.

** The number of the RSUs vested includes 104,417 shares that were withheld on behalf of employees to satisfy the statutory tax withholding requirements.

The vested shares included 7,059 shares vested but deferred in connection with our director deferral plan.

Equity-based compensation expenses related to the RSUs were $ 5,838 and $ 9,226 for three and six months ended June 30, 2022, respectively.

At June 30, 2022, the total unrecognized equity-based compensation expense related to outstanding RSUs was $ 49,967 , which is expected to be recognized over a weighted-average period of 28.2 months.

Performance Stock Units

Performance stock units (“PSUs”) are issued under the 2020 Incentive Plan and represent the right to receive shares of the Company’s common stock at a specified date in the future based on the satisfaction of various service conditions and the achievement of certain performance thresholds including year over year revenue growth and unlevered free cash flow growth.

Performance stock units (“PSUs”) granted in April 2021 and 2022 were issued under the 2020 Incentive Plan and represent the right to receive shares of the Company’s common stock at a specified date in the future based on the satisfaction of various service conditions and the achievement of certain performance thresholds for individual PSU plans including year over year revenue growth and unlevered free cash flow growth.

Share-based compensation for the PSUs is only recognized to the extent a threshold is probable of being achieved and is recognized using the accelerated attribution approach.

The Company will continue to assess the probability of each condition being achieved at each reporting period to determine whether and when to recognize compensation cost.

The following table presents a summary of activity on the PSUs for the period ended March 31, 2022.

The following table presents a summary of activity on the PSUs for the period ended June 30, 2022.

A summary of the Company’s PSU activity is as follows:

Non-vested PSUs as of December 31, 2021

Non-vested PSUs as of March 31, 2022

Equity-based compensation expense related to the PSUs was $ 947 for the three months ended March 31, 2022.

At March 31, 2022, the total unrecognized equity-based compensation expense related to outstanding PSUs was $ 4,382 , which is expected to be recognized over a weighted-average period of 17.3 months.

Under 2020 Incentive Plan, in April 2022, the Company issued performance stock units to certain employees to receive shares of the Company’s common stock at a specified date in the future on the satisfaction of various service conditions and the achievement of certain performance thresholds including year over year revenue growth and unlevered free cash flow growth.

Certain terms in this award were modified from 2021 award of performance stock units.

Non-vested PSUs as of June 30, 2022

Equity-based compensation expenses related to the PSUs were $ 648 and $ 1,595 for the three and six months ended June 30, 2022.

At June 30, 2022, the total unrecognized equity-based compensation expense related to outstanding PSUs was $ 5,293 , which is expected to be recognized over a weighted-average period of 17.4 months.

The following table summarizes the components of total equity-based compensation expense included in the condensed consolidated statements of operations and comprehensive loss for each period presented:

THREE MONTHS ENDED MARCH 31,

THREE MONTHS ENDED JUNE 30,

SIX MONTHS ENDED JUNE 30,

Cost of revenues

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Research and development

General and administrative expenses

General and administrative

2020 Employee Stock Purchase Plan

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The maximum number of shares authorized for sale under the Employee Stock Purchase Plan is 1,700,000 shares.

As of March 31, 2022, no shares of common stock have been purchased under the Employee Stock Purchase Plan and no offering has been made to eligible employees under the Plan.

As of June 30, 2022, no shares of common stock have been purchased under the Employee Stock Purchase Plan and no offering has been made to eligible employees under the Plan.

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”), in deciding how to allocate resources and in assessing performance.

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Since the Company operates in one operating segment, all required financial segment information can be found in the condensed consolidated financial statements.

The following table summarizes revenue by geographic area for the three months ended March 31, 2022 and 2021:

The following table summarizes revenue by geographic area for the three and six months ended June 30, 2022 and 2021:

THREE MONTHS ENDED

SIX MONTHS ENDED

Revenue (1) :

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The currently forecasted ETR may vary from the actual year-end due to the changes in these factors.

The Company's global ETR for the three months ended March 31, 2022 and 2021 were 41 % and 33 %, respectively, including discrete tax items.

The Company's global ETR for the three and six months ended June 30, 2022 and 2021 were 121 %, ( 103 )%, 75 %, and 1,131 % , respectively, including discrete tax items.

The current year increase in the ETR was principally due to the relative mix of domestic and international earnings.

Earnings per Share

Earnings per share is computed by dividing net income by the weighted-average common shares outstanding.

Earnings per share is computed by dividing net income (loss) by the weighted-average common shares outstanding.

Basic earnings per common share is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the period.

Diluted earnings per common share considers potentially dilutive securities outstanding during the period.

Basic and diluted earnings per share is computed by dividing net income by the weighted-average common shares outstanding:

THREE MONTHS ENDED MARCH 31,

Net income available to common shareholders

Basic and diluted earnings per share is computed by dividing net income (loss) by the weighted-average common shares outstanding:

THREE MONTHS ENDED JUNE 30,

SIX MONTHS ENDED JUNE 30,

Net income (loss) available to common shareholders

Basic weighted average common shares outstanding

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements